METHOD Subcommand (AREG command)

METHOD specifies the estimation technique. Three different estimation techniques are available.

  • If METHOD is not specified, the Prais-Winsten method is used.
  • Only one method can be specified on the METHOD subcommand.

The available methods are:

PW. Prais-Winsten method. This generalized least-squares approach is the default 1.

CO. Cochrane-Orcutt method. 2

ML. Exact maximum-likelihood method. This method can be used when one of the independent variables is the lagged dependent variable. It can also handle missing data anywhere in the series 3.

Example

AREG VARY WITH VARX
  /METHOD=CO.

In this example, the Cochrane-Orcutt method is used to estimate the regression model.

1 Johnston, J. 1984. Econometric methods. New York: McGraw-Hill.
2 Johnston, J. 1984. Econometric methods. New York: McGraw-Hill.
3 Kohn, R., and C. Ansley. 1986. Estimation, prediction, and interpolation for ARIMA models with missing data. Journal of the American Statistical Association, 81, 751-761.